Safe and Sound

Farmers & Merchants Bank

Lakeland, GA

1

Star Rating

Founded in 1907, Farmers & Merchants Bank is an FDIC-insured bank based in Lakeland, GA. The bank holds equity of $28.5 million on assets of $514.9 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 119 full-time employees in 6 offices in GA, the bank currently holds loans and leases worth $381.2 million, $300.6 million of which are for real estate. U.S. bank customers currently have $469.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Farmers & Merchants Bank exhibited a significantly below-average condition, earning 1 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three important criteria Bankrate used to evaluate American banks.

THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of a bank's financial fortitude. It works as a buffer against losses and provides protection for accountholders when a bank is experiencing economic trouble. When it comes to safety and soundness, the more capital, the better.

Farmers & Merchants Bank scored below the national average of 13.13 on our test to measure the adequacy of a bank's capital, achieving a score of 2 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Farmers & Merchants Bank's Tier 1 capital ratio was 6.82 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial challenges.

Overall, Farmers & Merchants Bank held equity amounting to 5.54 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due mortgages.

A bank with extensive holdings of these types of assets may eventually be required to use capital to cover losses, reducing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

Farmers & Merchants Bank scored 0 out of a possible 40 points on Bankrate's asset quality test, coming in below the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 4.32 percent of Farmers & Merchants Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Farmers & Merchants Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, diminish a bank's ability to do those things.

Farmers & Merchants Bank scored 0 out of a possible 30 on Bankrate's earnings test, failing to reach the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. Farmers & Merchants Bank's most recent annualized quarterly return on equity was 2.43 percent, below the national average of 8.10 percent.

The bank recorded net income of $705,000 on total equity of $28.5 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.13 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.

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